Baotou firm shuts down for 1 month

Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co plans to halt some of its operations for a month, intending to stabilize the tumbling prices of rare-earth products, the company announced Wednesday.

The Baotou firm decided not only to suspend the production of its smelting and separation subsidiaries from Tuesday, but also to stop providing raw materials for other companies' smelting and separation operations, according to its post on the Shanghai Stock Exchange.

The company attributed the move to the depressed domestic rare-earth market and slumping prices of rare-earth products.

Domestic prices of rare-earth metals, which are mainly used in the defense, renewable energy and high-end electronics industries, have fallen by around 50 percent since the beginning of this year, according to daily price data provided by Chinese rare-earth information portal cre.net.

Experts said that some domestic counterparts may follow the company's steps and stop providing raw materials for smelting and separation companies, which will decrease the production of rare-earth products and hopefully increase prices.

But Chen Zhanheng, director of the academic department of the Chinese Society of Rare Earths, worried that Baotou Steel's decision will not get prices back on track, even if others participate, as unlicensed firms around China are producing rare earths illegally in large amounts and selling them at low prices.

Chen also noted that the price of rare earths may keep decreasing in the near future.

On October 15, the Ministry of Industry and Information Technology issued a notice requiring relevant provinces, such as North China's Hebei Province, to complete a new round of crackdowns within one month - a move which could cause more rare earths to enter the market as producers try to get rid of illegal products, Chen said.

"The illegal industry chain doesn't just occupy the domestic markets. Rare-earth smugglers are also gradually squeezing law-abiding producers like Baotou Steel out of the overseas market," said Du Shuaibing, an analyst at Beijing-based research agency Baiinfo.

Foreign buyers prefer the low prices of the smuggled rare earths, forcing China's legal exporters to either decrease their prices or increase their inventories, said Du.

The amount of rare earths smuggled abroad was 1.2 times higher than that counted by China Customs Statistics in 2011, according to Du.

Data from China Customs Statistics on August 21 indicated that China exported 21,730 tons of rare-earth products between January and July 2012, a 36.7 percent decrease year-on-year.